Could Disney Trade ESPN to Comcast for Full Hulu Control?

Might Disney surrender ESPN to Comcast in exchange for full control of Hulu? A trade like that may seem unlikely, but there’s a chance it could make financial sense for the House of Mouse.

Disney’s corporate refocusing on achieving profitability from its streaming segment has taken at least some positive steps forward. Disney+ Basic, the new ad-supported tier of the company’s flagship streamer, attracted more users during its first month than either Netflix or HBO Max’s ad-bearing tiers did, for example.

Disney+ Basic is also now available on Roku devices, expanding its reach even further. Disney has also resorted to less desirable methods like layoffs to cut costs, but it’s clear it has a plan for digging out from under a company-wide debt load at $40 billion.

But there are ways Disney could offload some of that debt more quickly if it wanted to. Puck analyst William D. Cohan suggests that one potential path to shedding some of that unsightly number would be to package the debt with ESPN in a swap for Comcast's stake in Hulu.

This creative solution would certainly help Disney solve its Hulu problem once and for all. Disney owns 67% of Hulu currently, having acquired the one-third share owned by FOX along with the majority of its other entertainment assets in 2019. Comcast still owns the other 33% of Hulu, and under the terms of a contract between the two companies, it must sell that stake to Disney if Disney decides to buy before the end of 2024.

But streaming losses mounting to more than $1 billon per quarter have forced Disney to rethink its streaming future. CEO Bob Iger said in February the company would be “aggressively” curating its general entertainment programming, which many interpreted as a direct allusion to Disney’s general entertainment service Hulu. A move to suddenly acquire the rest of Hulu by trading ESPN for it would be a shock to the industry, but it would certainly help Disney put the issue to bed once and for all, and packaging some of its debt in such a trade would be beneficial to the company.

Disney’s history with ESPN hasn’t always been a fairy tale. Sagging ratings and the soaring costs of sports rights seem to be a toxic mix. Company leaders have sent mixed signals about monetizing the platform with betting - a possible revenue stream that runs counter to Disney’s family-friendly image. Although ESPN+ is popular, a DTC linear ESPN feed seems financially impossible. You only need to look at the Bally Sports dumpster fire to see that.

Still, live sports seems to be the only programming even capable of drawing an audience to linear channels. In 2021, the NFL accounted for 75 of the 100 most-watched shows. Sports took 95 of the top 100 slots. Last year, sports were 94 of the 100 highest-rated programs. Losing ESPN from its linear portfolio would harm Disney’s leverage in future carriage disputes. Monday Night Football alone is a crown jewel.

If Disney decided to swap ESPN and some of its debt load for the final third of Hulu now owned by Comcast, the true winner would be Peacock. That service, whose parent company NBCUniversal is owned by Comcast, would likely be merged with ESPN+ and instantly become the industry leader in sports streaming offerings. ESPN+ carried more than 27,000 live sporting events in 2022, including live games from all the professional American sports leagues. Peacock already offers NFL football, MLB baseball, WWE wrestling, English Premier League soccer, tennis, golf, cycling and more; adding ESPN’s rights portfolio would make it a force to be reckoned with.

Such a move would also unite the WWE and UFC streaming rights under one company. That could be the goal for the two fighting promotions soon, anyway. WWE was purchased by UFC's parent company Endeavor earlier this week, and there are some indications the two may pursue a unified streaming deal after WWE’s current deal with Peacock expires in 2026.

For now, the signs make it seem more likely that Disney will keep ESPN, as Iger has done his best to tamp down any talk that his company would put the sports vertical on the market. The better possibility is that Disney tries to sell Hulu and focus its streaming entertainment efforts on Disney+, but creative options certainly remain to the company.